Research by TransUnion in the UK shows that the consumer credit market saw continued strong growth with rising outstanding balances, increased new credit issuance and expanded credit participation during Q1 2026, while the consumer delinquency rate rose only slightly compared to the same period a year ago.The year also started with strong consumer optimism, with 47% of UK consumers feeling optimistic about the future of their household finances during the first quarter of 20261, the highest level seen since the beginning of the current high inflation environment which started four years ago. However, consumer financial optimism has since fallen to 44% in Q2 2026, largely due to the knock-on effects of the Iran conflict on energy prices and inflation2, alongside the already slowing economy and weakening labour market3.These were among the findings in TransUnion’s inaugural UK Credit Industry Insights Report4, which offers a quarterly overview summarising consumer credit market health and trends, as well as perspectives on future performance for the UK lending industry.Consumers Have Absorbed Higher Prices Better Than ExpectedOutstanding consumer credit balances reached a new high in Q1 2026, surpassing £1.88 trillion, up 3.7% year-over-year (YoY). While mortgages account for the majority of total balances, unsecured credit balances also continued to rise, reaching £260 billion, up 5.7% YoY. Growth was particularly pronounced for credit cards and unsecured loans.While consumers appear to be carrying record levels of outstanding credit, the broader affordability picture reflects a more resilient consumer than the headline debt figure alone suggests. The ratio of debt to income, in the form of average unsecured credit per consumer to median monthly post-tax income, stood at 3.78 in Q1 2026, down from 3.81 in Q1 2025 and at its lowest point recorded in the last decade, with the ratio having peaked at 4.87 in 2019 before the pandemic.This unexpected downward trend in the debt-to-income ratio reflects the significant median wage growth observed in recent years, driven by the previously tight labour market. Median monthly post-tax income rose by 22% between Q1 2022 and Q1 2026, broadly in line with the 21% increase in the Consumer Price Index including Housing Costs (CPIH)5 over the same period.Consumer financial stress as represented by delinquency rates rose slowly over the last year, with the rate of increase being relatively low despite the persistent pressures of the cost of living crisis. The proportion of consumers holding at least one credit product in serious delinquency (90 or more days past due) has increased slowly to 3.34% in Q1 2026, a 19 basis point (bps) YoY increase from Q1 2025 and a 30bps increase from Q1 2024, two years prior. This rate is growing but remains comfortably below the Q1 2019 pre-pandemic levels of 4.31%.In a more relatable context, 1.35 million UK consumers are currently in a state of serious delinquency on at least one credit product. As a proportion of the population, and in context of pre-pandemic norms, this remains low, but it nevertheless highlights the ongoing need for proper care and support for those consumers in a state of financial stress, as well as the continuing need for supporting credit education programmes.Growth Masks Gap: UK Trails Peers on Credit ParticipationDespite significant growth in unsecured credit originations (a measure of new accounts opened), the high competition for market share among lenders and the backdrop of the cost of living crisis, the actual proportion of consumers holding an open credit account grew relatively slowly, expanding to 70.1% of the UK adult population, up from 69.5% two years prior in Q1 2024. Any increase in credit engagement is worth noting, as it suggests rising credit demand and growing credit awareness and education.However, this proportion is in stark contrast to other developed economies with similar profiles such as the United States and Canada, where 97%6 and 96%7 of credit-eligible adult consumers (age 18+), respectively, hold at least one credit product. This distinct difference in credit holding and usage behaviour can be partially attributed to varying cultural attitudes towards credit and more conservative lending practices in the UK. These are driven by multiple factors including tighter consumer regulation, stricter affordability assessments and credit price caps.“The UK credit market remained on a firmer footing than many might have expected during the first quarter of the year, given the persistent pressures of the cost of living crisis,” said James O’Donnell, director of research and consulting at TransUnion in the UK. “Credit participation continues to expand slowly, with balances growing across most major products. Despite this, overall consumer credit health remains relatively stable, with a few early signs of stress emerging. Nonetheless, while growth opportunities remain, the market is likely to be somewhat cautious amidst uncertainty around the near-term inflation outlook, the softening labour market and the holding pattern on interest rates from the Bank of England.”Credit Card Growth Led by New Entrants and Consumers Leveraging CreditRising lender issuance of new accounts and renewed market competition drove higher credit card engagement. Credit card originations (a measure of new cards issued) during Q4 20258 surged 26.2% YoY, supported by a disproportionate rise in originations among subprime and near prime9 borrowers. Originations among those higher risk borrower segments rose 43% YoY as 570,000 new cards were issued in Q4 2025 – 170,000 more than Q4 2024. However, the majority of originations still sit within the low-risk tiers, with prime or better brackets responsible for 2.6m of new cards issued in Q4 2025 – nearly 500K more than Q4 2024. It’s clear from the broad growth that consumer demand for new cards is high across the risk spectrum.The average balance per consumer across all cards in wallet rose 4.4% YoY in Q1 2026, faster than the rate of consumer price inflation for the same quarter (3.3% CPIH), suggesting a greater level of engagement among consumers. However, the proportion of credit limits utilised remained flat, up just 0.1 percentage points YoY from 23.9% in Q1 2025. It’s notable that the growth in average balances and in utilisation was well below the growth in new card openings. This points to the increased activity being driven by high lender competition for market share, increasingly compelling product offers and increased interest among consumers who had not previously held credit cards, with 1.1million additional consumers holding at least one credit card. It’s also notable that total outstanding balances grew fastest among consumers using balance transfer and promotional cards, rising 18% YoY, while balances held on other cards grew just 4% YoY.Consumers are also taking advantage of increased lender appetite by opening multiple cards, with near prime credit card holders now holding an average of 3.4 cards each, up from 3.1 in Q1 2025.Despite higher outstanding balances and increased consumer uptake, credit card arrears rates remained relatively stable across the year: the consumer-level serious delinquency rate was 2.06%, up 8bps YoY. For context, rates fluctuated within a normal seasonal range of 1.92% and 2.16% over the last three years. In general, consumer resilience remains stable among credit card users and issuers have maintained strong credit quality on their portfolios despite high originations growth and increased availability of cards to higher risk consumers.“For the past two years, stronger competition in credit cards has helped drive growth by expanding credit availability, including further into higher-risk consumer segments. However, the environment is changing. As economic pressures build, that broader risk exposure is likely to become more visible in portfolio performance. This warrants careful monitoring,” O’Donnell said.Unsecured Loan Originations Grew; Credit Performance DeterioratedUnsecured loan originations volumes jumped 18.7% YoY to Q4 2025, with near prime originations growing the fastest of all risk brackets at 24.6% YoY, representing a continued rise in risk appetite among lenders. New account balances grew at a similarly strong pace, up 19.3% YoY. This continues a two-year strong growth cycle for the unsecured market overall and marks the strongest YoY growth rate since the pandemic. However, the rate of growth is more stable in context of the average balance per consumer, which grew by just 3.5% YoY, only slightly exceeding the Q1 2026 inflation rate of 3.3% (CPIH)8.Part of this strong originations growth may reflect the evolving convenience of digital credit journeys, with a growing prevalence of aggregator marketplaces in loan application journeys10 and rising credit awareness among younger consumers. It was also more directly supported by increased credit availability, particularly in the non-prime segment. Increasing lender competition and greater risk tolerance drove a £1.4bn YoY increase in outstanding credit balances sitting with near-prime and subprime borrowers, representing a double-digit rise of 11.1% YoY. However, it’s important to note that the majority of unsecured loan openings continue to sit with prime, prime plus and super prime consumers, with the combined outstanding balance of this lower risk, less vulnerable group of consumers rising £3.3bn YoY, up 6.7%.The change in lenders’ risk appetite appears to have filtered through into how consumers view their access to credit. The proportion who felt they had sufficient access to credit rose to 64% by the end of 2025, up from 55% at the end of 2024, according to the TransUnion UK Q1 2026 Consumer Pulse Survey. That, in turn, supports the suggestion that much of the recent growth has been driven by previously unmet consumer demand finally being met. If that is the case, recent growth rates may become harder to sustain once the existing supply gap is largely absorbed.As the unsecured loan sector saw an increased share of new accounts issued to higher-risk borrowers, delinquency rates showed early signs of deterioration. Consumer-level serious delinquencies increased by 40 bps YoY to 4.17% at the end of Q1 2026, and early indicators suggest that trend will continue into subsequent quarters. This is the highest serious delinquency rate observed on unsecured loans since Q4 2021 (4.24%), prior to the spike in inflation, the hike in interest rates and the subsequent lender tightening of risk thresholds. This trend will warrant closer attention if it continues.“Expanding access to unsecured personal loan products for higher-risk consumers must be carefully balanced with the added risk this creates, not just for lender portfolios, but more importantly for vulnerable consumers. Risk is not determined by loan size alone. Many higher-risk borrowers with smaller loans are facing the most serious repayment challenges,” O’Donnell said. “Lenders need to monitor this trend closely, as strong origination growth alongside rising serious delinquency creates potential credit risk and consumer duty challenges, especially as the labour market softens, wage growth stalls, and living costs continue to rise.”NoYesLending30 Jun, 2026